PEOPLEUruguayans share a Spanish linguistic and cultural background, even though about one-quarter of the population is of Italian origin. Most are nominally Roman Catholic. although the majority of Uruguayans do not actively practice a religion. Church and state are officially separated.

Uruguay is distinguished by its high literacy rate, large urban middle class, and relatively even income distribution. The average Uruguayan standard of living compares favorably with that of most other Latin Americans. Metropolitan Montevideo, with about 1.4 million inhabitants, is the only large city. The rest of the urban population lives in about 20 towns. During the past two decades, an estimated 500,000 Uruguayans have emigrated, principally to Argentina and Spain. Emigration to the United States also rose significantly. As a result of the low birth rate, high life expectancy, and relatively high rate of emigration of younger people, Uruguay's population is quite mature.

HISTORY The only inhabitants of Uruguay before European colonization of the area were the Charrua Indians, a small tribe driven south by the Guarani Indians of Paraguay. The Spanish discovered the territory of present-day Uruguay in 1516, but the Indians' fierce resistance to conquest, combined with the absence of gold and silver, limited settlement in the region during the 16th and 17th centuries. The Spanish introduced cattle, which became a source of wealth in the region. Spanish colonization increased as Spain sought to limit Portugal's expansion of Brazil's frontiers.

Montevideo was founded by the Spanish in the early 18th century as a military stronghold; its natural harbor soon developed into a commercial center competing with Argentina's capital, Buenos Aires. Uruguay's early 19th century history was shaped by ongoing conflicts between the British, Spanish, Portuguese, and colonial forces for dominance in the Argentina-Brazil-Uruguay region. In 1811, Jose Gervasio Artigas, who became Uruguay�s national hero, launched a successful revolt against Spain. In 1821, the Provincia Oriental del Rio de la Plata, present-day Uruguay, was annexed to Brazil by Portugal. The Provincia declared independence from Brazil in August 25, 1825 (after numerous revolts in 1821, 1823, and 1825) but decided to adhere to a regional federation with Argentina.

The regional federation defeated Brazil after 3-year war. The 1828 Treaty of Montevideo, fostered by the United Kingdom, gave birth to Uruguay as an independent state. The nation's first constitution was adopted in 1830. The remainder of the 19th century, under a series of elected and appointed presidents, saw interventions by neighboring states, political and economic fluctuations, and large inflows of immigrants, mostly from Europe. Jose Batlle y Ordo�ez, president from 1903 to 1907 and again from 1911 to 1915, set the pattern for Uruguay's modern political development. He established widespread political, social, and economic reforms such as a welfare program, government participation in many facets of the economy, and a plural executive. Some of these reforms were continued by his successors.

By 1966, economic, political, and social difficulties led to constitutional amendments, and a new constitution was adopted in 1967. In 1973, amid increasing economic and political turmoil, the armed forces closed the Congress and established a civilian-military regime, characterized by repression and widespread human rights abuses. A new constitution drafted by the military was rejected in a November 1980 plebiscite. Following the plebiscite, the armed forces announced a plan for return to civilian rule. National elections were held in 1984. Colorado Party leader Julio Maria Sanguinetti won the presidency and served from 1985 to 1990. The first Sanguinetti administration implemented economic reforms and consolidated democracy following the country's years under military rule.

Sanguinetti's economic reforms, focusing on the attraction of foreign trade and capital, achieved some success and stabilized the economy. In order to promote national reconciliation and facilitate the return of democratic civilian rule, Sanguinetti secured public approval by plebiscite of a controversial general amnesty for military leaders accused of committing human rights violations under the military regime, and sped the release of former guerrillas.

The National Party's Luis Alberto Lacalle won the 1989 presidential election and served from 1990 to 1995. Lacalle executed major structural economic reforms and pursued further liberalization of the trade regime. Uruguay became a founding member of MERCOSUR in 1991 (the Southern Cone Common Market, which includes Argentina, Brazil and Paraguay) . Despite economic growth during Lacalle's term, adjustment and privatization efforts provoked political opposition, and some reforms were overturned by referendum.

In the 1994 elections, former President Sanguinetti won a new term, which ran from 1995 until March 2000. As no single party had a majority in the General Assembly, the National Party joined with Sanguinetti's Colorado Party in a coalition government. The Sanguinetti government continued Uruguay's economic reforms and integration into MERCOSUR. Other important reforms were aimed at improving the electoral system, social security, education, and public safety. The economy grew steadily for most of Sanguinetti's term, until low commodity prices and economic difficulties in its main export markets caused a recession in 1999, which continued into 2003.

The 1999 national elections were held under a new electoral system established by constitutional amendment. Primaries in April decided single presidential candidates for each party, and national elections on October 31 determined representation in the legislature. As no presidential candidate received a majority in the October election, a runoff was held in November. In the runoff, Colorado Party candidate Jorge Batlle, aided by the support of the National Party, defeated Frente Amplio candidate Tabare Vazquez.

Batlle's 5-year term began on March 1, 2000. The Colorado Party and National Party (Blancos) continued their legislative coalition, as neither party by itself won as many seats in either chamber as did the Frente Amplio. The formal coalition ended in November 2002, when the Blancos withdrew their ministers from the cabinet, although the Blancos continued to support the Colorados on most issues.

On June 27, 2004 the parties held primary elections to select their candidates for the national elections to be held on October 31. The Frente Amplio had already determined that Vazquez would be its candidate, the Colorados settled on former Interior Minister Guillermo Stirling, and the Blanco Party chose Jorge Larranaga, a former state governor and senator. In the October 31, 2004 election, Vasquez won a majority of the popular vote and will be sworn in as President on March 1, 2005.

President Batlle's priorities have included promoting economic growth, increasing international trade, attracting foreign investment, reducing the size of government, and resolving issues related to Uruguayans who disappeared during the military government. His coalition government also has passed laws authorizing the initial demonopolization of the state-owned telecommunications and energy companies, with the latter being overturned by popular referendum in December 2003.

GOVERNMENT AND POLITICAL CONDITIONSUruguay's 1967 constitution institutionalizes a strong presidency, subject to legislative and judicial checks. The president's term is 5 years. Thirteen cabinet ministers, appointed by the president, head executive departments. The constitution provides for a bicameral General Assembly responsible for enacting laws and regulating the administration of justice. The General Assembly consists of a 30-member Senate, presided over by the vice president of the republic, and a 99-member Chamber of Deputies. In the 1999 election, the Frente Amplio won 40% of the seats in each chamber, the Colorado Party 33%, the National Party 22%, and the Nuevo Espacio Party 4%.

The highest court is the Supreme Court; below it are appellate and lower courts and justices of the peace. In addition, there are electoral and administrative ("contentious") courts, an accounts court, and a military judicial system.

Principal Government OfficialsPresident--Jorge Luis Batlle Iba�ez Minister of Foreign Affairs--Didier OperttiAmbassador to the United States--Hugo Fernandez FaingoldAmbassador to the United Nations--Felipe PaolilloAmbassador to the OAS--Juan Enrique Fischer

Uruguay maintains an embassy in the United States at 2715 M Street, NW, Washington, DC 20007 (tel. 202-331-1313, fax 202-331-8142). Uruguay maintains consulates in Miami, Los Angeles, and New York.

ECONOMYUruguay's economy remains dependent on agriculture. Although agricultural production accounts for only 9% of the gross domestic product (GDP), agricultural-related products make up more than half of the country's exports. The industrial sector, which produces 16% of GDP, is largely based on the transformation of agricultural products. Leading economic sectors include meat processing, agribusiness, wool, leather production and apparel, textiles, and chemicals.

The Batlle administration has been confronted with serious economic problems. Devaluation in Brazil in 1999 made Uruguayan goods less competitive, and an outbreak of foot and mouth disease in 2001 curtailed beef exports to North America. Starting in late 2001, an economic crisis in Argentina undermined Uruguay's economy. Exports to Argentina and tourist revenues fell dramatically. In mid-2002 Argentine withdrawals from Uruguayan banks started a bank run that was overcome only by massive borrowing from international financial institutions. This, in turn, led to serious debt sustainability problems. In May 2003, the government implemented a successful debt swap that lowered country risk and helped restore confidence. Uruguay's economy resumed growth in 2003, with a 2.5% rise in GDP. GDP grew 14% in the first quarter of 2004 (over a very low first quarter of 2003) and 7%-9% growth is expected for calendar year 2004.

The government's strategy to stimulate growth is based on increasing exports, both to traditional partners in MERCOSUR and to the European Union (EU) and North America. Uruguay enjoys a positive investment climate, with a strong legal system and open financial markets. It grants equal treatment to national and foreign investors and, aside from very few sectors, there is neither de jure nor de facto discrimination toward investment by source or origin.

Uruguay has traditionally favored substantial state involvement in the economy, and privatization is still widely opposed. Recent governments have carried out cautious programs of economic liberalization similar to those in many other Latin American countries. They included lowering tariffs, controlling deficit spending, reducing inflation, and cutting the size of government.

The Lacalle administration implemented a 1991 state company reform law, though privatization was stalled when voters rejected the sale of the state telephone company, ANTEL, in a 1992 referendum. Long-distance calls and data transmission were opened to competition in 2001, but basic telephony still remains a state monopoly. Other former state sectors have been partially liberalized, including insurance, mortgages, road construction and repair, piped-gas distribution, energy generation, water sanitation and distribution, cellular telephony, and airline transportation. Another law, passed in 2000, demonopolized oil refining activities and allowed the state energy company to associate with foreign partners, while still remaining under government control. However, the law was repealed in a popular referendum.

NATIONAL SECURITYThe armed forces are constitutionally subordinate to the president through the minister of defense. By offering early retirement incentives, the government has trimmed the armed forces to about 14,500 for the army, 6,000 for the navy, and 3,000 for the air force. As of February 2003, Uruguay had 1,754 soldiers deployed in 11 UN peacekeeping missions. The largest groups were in the Congo, where 1,549 Uruguayan troops controlled one sector of the country, and the Sinai, where 60 troops were stationed.

FOREIGN RELATIONSUruguay traditionally has had strong political and cultural links with its neighbors and Europe. With globalization and regional economic problems, its links to North America have strengthened. Uruguay is a strong advocate of constitutional democracy, political pluralism, and individual liberties. Its international relations historically have been guided by the principles of non-intervention, multilateralism, respect for national sovereignty, and reliance on the rule of law to settle disputes. Uruguay's international relations also reflect its drive to seek export markets and foreign investment. It is a founding member of MERCOSUR. In June 1991, MERCOSUR and the United States signed the Rose Garden Agreement (also known as the "Four Plus One" Agreement). The agreement was non-operational until June 2001 when MERCOSUR invited the U.S. to discuss the feasibility of market access negotiations. The first U.S.-MERCOSUR meeting was held on September 24, 2001, and resulted in the creation of four working groups on industrial trade, e-commerce, agriculture, and investment. However, meetings have been sporadic.

Uruguay is a member of the Rio Group, an association of Latin American states that deals with multilateral security issues (under the Inter-American Treaty of Reciprocal Assistance). Uruguay's location between Argentina and Brazil makes close relations with these two larger neighbors and MERCOSUR associate members Chile and Bolivia particularly important. An early proponent of the Enterprise for the Americas Initiative, Uruguay has actively participated in the follow-up process to the periodic Summits of the Americas, especially the Free Trade Area of the Americas (FTAA). Usually considered a neutral country and blessed with a professional diplomatic corps, Uruguay is often called on to preside over international bodies. Uruguay chairs the FTAA agricultural committee and is a member of the Latin American Integration Association (ALADI), a trade association based in Montevideo that includes 10 South American countries plus Mexico and Cuba.

U.S.-URUGUAYAN RELATIONSU.S.-Uruguayan relations traditionally have been based on a common outlook and emphasis on democratic ideals. Uruguay works closely with the United States bilaterally and internationally to foster economic growth, trade, and political cooperation. Under President Batlle, Uruguay has been particularly open to increasing ties with the United States. Improved trade ties--whether through a bilateral free trade agreement, MERCOSUR, or the FTAA--have been the Batlle administration's priority. In 2002, Uruguay and the U.S. created a Joint Commission on Trade and Investment (JCTI) to exchange ideas on a variety of economic topics. In March 2003, the JCTI identified six areas of concentration until the eventual signing of the FTAA in 2005: customs issues, intellectual property protection, investment, labor, environment, and trade in goods. In early 2004, U.S. and Uruguay formally started negotiating a bilateral investment treaty and an open skies agreement. More than 100 U.S.-owned companies operate in Uruguay, and many more market U.S. goods and services.

Uruguay cooperates with the United States on law enforcement matters such as regional efforts to fight drug trafficking and terrorism. It has also been very active in human rights issues, sponsoring UN resolutions on the human rights situation in Cuba in 2002 and 2003.

From 1999 through early 2003 Uruguayan citizens were exempted from visas when entering the United States under the Visa Waiver Program. This exemption was withdrawn on April 16, 2003, based on the high overstay rates for Uruguayans and worldwide national security concerns

The U.S. Embassy in Uruguay is located at Lauro Muller 1776, Montevideo (tel: 598-2 418-7777; fax: 598-2-410-0022). The mailing address for the embassy is UNIT 4500, APO AA 34035. The Embassy also has an Internet web page at http://uruguay.usembassy.gov